Rauner budget proposal at odds with re-election rhetoric

Gov. Bruce Rauner approaches the speaker's dais in the House Chamber to deliver his budget address to a joint session of the General Assembly, Feb. 14, 2018, at the Capitol in Springfield, Ill.

Gov. Bruce Rauner approaches the speaker's dais in the House Chamber to deliver his budget address to a joint session of the General Assembly, Feb. 14, 2018, at the Capitol in Springfield, Ill. (Rich Saal / The State Journal-Register)

As he asks voters for a second term, Republican Gov. Bruce Rauner delivered a budget address Wednesday that was often at odds with what he calls for on the campaign trail.

Candidate Rauner says he wants a freeze on local property taxes, touts changes to increase funding for poorer schools as a key accomplishment and derides the income tax hike lawmakers put in place last year over his veto. But Gov. Rauner, facing pressure to balance the state's books and live up to his promise to bring savvy financial management to state government, offered a spending plan that undermines much of that platform.

His budget could force local property tax hikes by requiring school districts to pick up the cost of teacher pensions. That move also could wipe out much of the extra money that’s earmarked for schools. And instead of declining to spend the money from the tax hike, it’s integral to his plan.

Left at the end of the day is a budget proposal that serves primarily as a political document designed to blunt criticism that he's failed to produce realistic solutions to the state's financial troubles so far in his first term. As such, Wednesday's proposal instantly ran up against political realities, as Democrats and Republicans alike dismissed it as “phony” and “cynical.”

"It was kind of Dr. Jekyll and Mr. Rauner," said Rep. Christian Mitchell, D-Chicago. "Part of the challenge of trying to deal with this governor is that he undermines himself at every turn and his credibility."

For his part, Rauner painted a picture of a government that could do more with less. He singled out for major cuts two of his favorite targets, teacher pension programs and public sector unions, saying each need to take more responsibility for their part in the state’s financial troubles by accepting less state help and lower state-subsidized health benefits. And he offered what he called a "path" to roll back the state's income tax rate by one quarter of a percentage point, provided lawmakers enact pension changes to cut retirement benefits for state employees — a proposal that faces a certain court challenge.

"Our budget proposal is a framework that balances the interests of those who spend our taxes with those who pay the taxes," Rauner said in his 35-minute address.

“The simple truth is this,” Rauner continued. “We have to change the way we manage pension costs and group health expenses. If we don’t, our finances will continue to deteriorate, our economy will remain sluggish and our tax burden will stay high and keep rising.”

Politically, Rauner is trying to appease multiple constituencies as he faces an immediate primary challenge from his right flank and a tough general election fight if he emerges victorious.

Some conservative legislators view Rauner as having bungled the record two-year budget impasse, driving Illinois deeper into debt while ultimately caving on an education funding bill that granted a huge pension concession to Chicago Public Schools. Their patience with him, already running thin when Republicans joined Democrats in enacting a 3.75 percent to 4.95 percent over his objections, ran out in late September when he approved a bill to expand taxpayer funding of abortions.

A budget that aims at clawing back the pension help Rauner agreed to for CPS and tries to reduce government-sponsored health benefits signals to conservatives that he hasn’t abandoned core principles.

At the same time, in regards to his battle with Democrats, the practical effect of Rauner’s budget proposal could be to set the stage for a likely summertime budget fight by giving Democrats two choices: Either go along with cost-savings measures aimed at their core union constituencies or take some of the blame for failing to produce a budget by the May 31 deadline.

“I think he had to thread the needle here because he’s going to hear criticism from the left and from some on the right,” said Sen. Jason Barickman, R-Bloomington. “I think he’s done a good job of putting forward what appears to be a balanced budget.”

But that sentiment wasn’t shared by all Republicans, particularly those who back his primary election challenger Rep. Jeanne Ives.

Rep. David McSweeney said the governor failed to deliver budget solutions in his proposal that matched the priorities he’d outlined in his speech.

“Specifically, he was relying on the tax increase that he allegedly opposed last year,” McSweeney said. “And I think the cost shift is going to result in a massive increase of property taxes.”

As expected, the proposal didn’t play well with Democrats. State Sen. Daniel Biss, an Evanston Democrat who is running for governor, said Rauner was engaging in “political grandstanding to divide the state.” Gold Coast businessman and philanthropist J.B. Pritzker, also a Democratic governor candidate, said Rauner was trying to balance the budget “on the backs of working families and on the backs of those who are owed pensions.”

In all, Rauner wants to spend about $37.6 billion of the roughly $38 billion the state is estimated to bring in from taxes and fees, leaving a theoretical surplus of $351 million even as the state still has billions in unpaid bills from the impasse. And much of his surplus depends on selling the James R. Thompson Center, a deal that's been stalled by an inability to reach an agreement with Mayor Rahm Emanuel.

The plan relies in part on roughly $1.5 billion in savings from shifting pension costs away from the state and onto school districts, slashing health insurance benefits for retirees, and reducing rates for doctors, hospitals and pharmacies that participate in the state’s Medicaid health care program for the poor. It also calls for raiding $600 million from specialized funds that would not be repaid.

Since those changes would require legislative action, critics including Democratic Senate President John Cullerton accused Rauner of presenting another budget plan that doesn’t add up.

“He’s asking us to pass laws that his own Republicans will not vote for,” Cullerton said during an appearance on “Illinois Lawmakers.” “He wants to take money away from the state employees, take money away from pensions, take money away from health care. He wants to cut funding for education? We’re not gonna vote for that.”

Rauner’s budget team pushed back at the notion that the spending plan was out of whack because it would require help from lawmakers to become reality.

“Every budget requires legislation,” said a top budget official during a background briefing with reporters. “There’s a misapprehension that passing legislation somehow constitutes an unbalanced budget. That’s absolutely, completely false.”

The administration characterized the legislation needed to make the budget a reality as “structural reforms that are required to realign responsibility to pay.”

Key to that realignment is a proposal that would have CPS, Downstate and suburban school districts and state universities pay more toward their teachers’ pension benefits, which are currently negotiated by individual school districts but paid for by the state. The idea is to “move pension costs to the people who do the buying, and make them responsible for the paying, too,” said Rauner.

CPS would be asked to pay $228 million for teacher pensions after the state just last year had agreed to pick it up as part of an overhaul of the school funding formula. Suburban and downstate districts would take on about $262 million a year for the next four years.

A similar plan was floated several years ago by Democratic House Speaker Michael Madigan, the governor’s chief political nemesis, but was pulled amid pushback from Republicans who argued the change could drive up property taxes or result in program cuts as schools take on the added cost.

Rauner’s attempt to do an end-run around collective bargaining agreements negotiated by unions is not new, but it’s been a nonstarter with Democrats who are aligned with organized labor. Indeed, Rauner also wants to remove health insurance from the list of items that are negotiated with unions. He estimates that change would result in savings of $470 million next year.

Meanwhile, those who fought to overhaul the way Illinois doles out education dollars to focus on pumping more money into low-income and struggling districts said Rauner’s pension plans would largely undo those gains. They questioned his decision to tinker with historic changes Rauner himself has claimed as a key victory.

"That's one domino, or that's one card you pull out of the stack and the rest of the stack comes tumbling down,” said Sen. Andy Manar, D-Bunker Hill.

The Chicago Teachers Union called it a “school funding bait and switch.”

Even those who did not support the funding changes because they thought it amounted to a bailout for CPS questioned Rauner’s attempt to renegotiate his own deal.

“He allowed it to go forward last year in that education bill where we were going to pick up Chicago teacher pensions, now he is reversing that just six months later when he should have had this food fight way back then,” said Ives, a Republican from Wheaton running against Rauner in the March 20 primary election.

Even with the cuts, Rauner’s plan relies on money from the income tax hike he’s pledged to roll back. Rather than match his proposed spending to a lower revenue level, Rauner offered a “path” for beginning to roll back the income tax rate, from 4.95 percent to 4.7 percent. The plan depends on enacting cost-saving changes to state worker and teacher pension benefits that would face a certain court challenge that could delay the changes — and any savings — for years.

There was plenty of skepticism surrounding the idea, and some opposition, including from the Ounce of Prevention Fund, the not-for-profit early childhood education advocacy organization run by First Lady Diana Rauner. In a statement, the group criticized the idea, saying it “will only compound the state’s inability to fund its stated priorities and serve its residents.”

Ives said the governor was moving too slowly on cutting taxes and failing to live up to his promise to restore fiscal discipline to the state.

“I”d like to see more cuts, and actually if he wanted to roll back that tax increase, he should have budgeted to roll back that tax increase,” Ives said. “You don’t see any of that in there.”